By William Boston and Christina Rogers
FRANKFURT -- European auto makers have plowed tens of billions
of dollars into developing electric cars and hybrids to comply with
stricter restrictions on tailpipe emissions. Now they face the
challenge of selling those vehicles.
Volkswagen AG, Porsche and Daimler AG's Mercedes-Benz all
unveiled electric models at this week's Frankfurt auto show that
will be heading to dealerships soon. Executives said more hybrid
and plug-in models were on their way, as part of a broader push to
electrify large parts of their lineups.
However, with prices still high and consumer demand lukewarm for
electrics, the industry is calling on European governments for
assistance, asking for tax subsidies and regulatory incentives to
make the cars more affordable and appealing to buyers.
"The electric car will not make its way naturally. Incentives
will play a huge role," Volkswagen Chief Executive Herbert Diess
said. The world's largest auto maker launched a new all-electric
compact car called the ID.3 on Tuesday.
Electric-car sales in Europe, which has some of the world's
toughest emissions requirements, are still anemic. In the first
half of this year, full electric and plug-in hybrid vehicles
accounted for just 2.4% of overall vehicle sales in the European
Globally, the market for electric cars also remains a tiny
niche, but car companies and their parts suppliers say they have
little choice but to shift the bulk of their research budgets to
Tougher emissions rules in Europe, China and the U.S. make it
difficult for companies to hit the targets for reducing tailpipe
air pollutants without selling more electrified models. That has
prompted many auto makers to pour money into battery technology and
building out a network of roadside chargers to support
Volkswagen, for instance, has invested nearly $1 billion in
Swedish startup Northvolt AB to build a battery factory in
Profits at auto makers such as Daimler and BMW AG have swooned
under the weight of the huge investments made in electric cars, but
the companies say there is no alternative.
"We have to invest and we are better placed than some to pay the
price. Electric cars do not come for free," BMW Chief Finance
Officer Nicolas Peter said.
Producing an electric car generally costs $12,000 more than
making a comparable gasoline car and parity won't be reached for
about five years, according to consulting firm McKinsey & Co.
The battery alone costs between $5,500 to $7,700 per vehicle,
Volkswagen's Mr. Diess said.
Without a significant technological breakthrough, auto makers
recognize they will have to rely on building volume and economies
of scale to help bring prices down.
"There's no doubt in our minds we have to drive these costs down
over the next many years," Daimler CEO Ola Källenius said. "You
cannot exactly influence what customers will buy." The company's
Mercedes brand this week unveiled a concept for a full-electric
version of its flagship S-class sedan.
The electric-cars showing in Frankfurt this week -- which also
included a hatchback from Honda Motor Co. and the first hybrid
model from Italian supercar maker Lamborghini, an Audi AG
subsidiary -- contrast sharply with auto shows in Detroit and New
York earlier this year. At the U.S. shows, sport-utility vehicles
and pickup trucks took center stage and fewer plug-in models made
While auto makers are selling more electric models in the U.S.,
many buyers have taken advantage of low gasoline prices and
purchasing large vehicles that consume more fuel, rather than
Many of the latest electric-car models can travel 200 miles or
more on a single charge -- a vast improvement from several years
ago when 100 miles or less was more typical. The new VW ID.3, for
instance, will offer a range of as much as 550 kilometers, or 342
miles, depending on the battery option.
But even with the expansion of range, potential customers are
still afraid of running down the battery on a longer journey and
not having a place to plug in. While the situation has improved and
new charging-station networks are under construction in Europe, the
steep price of electric vehicles and anxiety related to battery
range remain the biggest obstacles, according to industry
executives and analysts.
Governments in China and the U.S. already offer hefty incentives
for electric-car buyers, but sales of hybrid and plug-in models
remain a fraction of overall sales there.
Porsche's North American President Klaus Zellmer said those
psychological barriers to making the switch from gasoline to
electric won't be easy to overcome. The hurdle involves "a
completely new technology," he said. The sports-car maker this week
showed off the Taycan, a powerful, four-door sedan that runs on
battery power only.
That is why the industry is calling on governments to lend a
Hildegard Wortmann, Audi's board member in charge of sales, said
Europe still has sizable patches where drivers cannot charge their
vehicles on the road.
She called on European governments to follow the example of
Norway, where incentives such as tax rebates for buyers and free
parking, have made it the first country to hit a tipping point:
More than half of its vehicle sales are electric.
"We need to take a look at Norway," Ms. Wortmann said. "This
really small country has shown the rest of the world how it is
Write to William Boston at email@example.com and Christina
Rogers at firstname.lastname@example.org
(END) Dow Jones Newswires
September 11, 2019 13:43 ET (17:43 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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